Devices, System, and Method for Transfer of Commodities

ABSTRACT

A device, system, and method transfer commodities using tokens. The method performed by a first entity includes receiving from a second entity a request for tokens, the request indicating an unallocated position of a commodity of the second entity, the unallocated position managed by a third entity. The method includes transmitting to the third entity a further request for a transfer of the unallocated position of the second entity to the first entity. The method includes receiving from the third entity an indication of the transfer of the unallocated position from the second entity to the first entity. The method includes generating the tokens for the second entity that correspond to the unallocated position of the second entity of the request. The method includes generating the transmitting data including first data corresponding to the generation of the tokens and second data corresponding to an ownership of the tokens.

PRIORITY CLAIM/INCORPORATION BY REFERENCE

The present application is a continuation of U.S. patent applicationSer. No. 15/217,030, filed Jul. 22, 2016, which claims priority to U.S.Provisional Application Ser. No. 62/196,743 entitled “BankchainObligation Tokens” filed on Jul. 24, 2015 and U.S. ProvisionalApplication 62/287,772 entitled “Apparatus, Systems, and Methods forTransfer of Commodities” filed on Jan. 27, 2016. The entire disclosuresof these applications are incorporated herein by reference.

BACKGROUND INFORMATION

A financial institution or other institution may own a commodity that istransferable for funds (e.g., a cash amount). For example, the commoditymay be a metal (e.g., gold, silver, copper, platinum, palladium, etc.),a natural resource (e.g., oil, natural gas, diesel, ethanol, uranium,wheat, corn, sugar, soybean, coffee, coco, rice, oats, mils, lumber,etc.), a financial asset (e.g., a security, a treasury bond, a stock,etc.), etc. The institution that owns the commodity may be a seller in atransaction with a buyer who purchases the commodity. The exchange ofthe commodity for the funds may often take a significant amount of time,particularly when the commodity is a precious metal. Specifically, thebuyer may satisfy the responsibility of transmitting the funds but onlyupon delivery of the commodity. As the commodity is required to bephysically transferred into the possession of the buyer, thistransaction may entail a significant amount time, often several days.

The funds may be provided in a variety of ways. For example, cash may bephysically delivered from the buyer to the seller. In another example,an electronic payment may be transferred from a buyer's account to aseller's account. Although the transfer of the funds may be accomplishedin a more efficient and faster manner, the time in which the transactionis completed is still limited to the time required for the commodity tobe transferred.

SUMMARY OF THE INVENTION

The exemplary embodiments are directed to a method comprising: (A)receiving, by a computer of a first entity, from a computer of a secondentity a request for tokens, the request indicating a predeterminedamount of an unallocated position of a commodity of the second entity,the unallocated position being managed by a computer of a third entity;(B) transmitting, by the first entity computer, to the third entitycomputer a further request for a transfer of the unallocated position ofthe second entity to the first entity; (C) receiving, by the firstentity computer, from the third entity computer an indication of thetransfer of the unallocated position from the second entity to the firstentity; (D) generating, by the first entity computer, the tokens to beassigned to the second entity, the tokens corresponding to thepredetermined amount of the unallocated position of the second entityindicated in the request; (E) generating, by the first entity computer,data which includes first data corresponding to the generation of thetokens and second data corresponding to an ownership of the tokens; and(F) transmitting, by the first entity computer, the data to the secondentity computer.

In an embodiment, the step (E) further comprises: (i) encrypting, by thefirst entity computer, the data; and (ii) transmitting, by the firstentity computer, the encrypted data to predetermined recipients.

In an embodiment, wherein the predetermined recipients comprise thesecond and third entities.

In an embodiment, the indication is further indicative of a physicaltransfer of the commodity from the third entity to the first entity.

In an embodiment, the physical transfer of the commodity corresponds toa first value and the predetermined amount of the unallocated positionof the second entity corresponds to a second value, the first valuebeing greater than the second value.

In an embodiment, the method further comprises: generating, by the firstentity computer, further tokens to be assigned to the third entity, thefurther tokens corresponding to a difference between the first value andthe second value; and generating, by the first entity computer, furtherdata which includes third data corresponding to the generation of thefurther tokens and fourth data corresponding to a further ownership ofthe further tokens.

In an embodiment, the step (E) further comprises: (i) encrypting, by thefirst entity computer, the data and the further data; and (ii)transmitting, by the first entity computer, the encrypted data and theencrypted further data to predetermined recipients.

In an embodiment, the first entity is a chartered trust company, whereinthe second entity is a commodity dealer, and wherein the third entity isa clearing member.

In an embodiment, the further request instructs the third entity toallocate the commodity from the third entity to the first entity, theunallocated position of the second entity corresponding at leastpartially to the allocated commodity.

In an embodiment, the commodity is gold.

The exemplary embodiments are directed to a device comprising: anon-transitory memory having a program stored thereon; and a processorexecuting the program, wherein the execution of the program causes theprocessor to perform operations comprising: (A) receiving from acomputer of a second entity a request for tokens, the request indicatinga predetermined amount of an unallocated position of a commodity of thesecond entity, the unallocated position being managed by a computer of athird entity; (B) transmitting to the third entity computer a furtherrequest for a transfer of the unallocated position of the second entityto the first entity; (C) receiving from the third entity computer anindication of the transfer of the unallocated position from the secondentity to the first entity; (D) generating the tokens to be assigned tothe second entity, the tokens corresponding to the predetermined amountof the unallocated position of the second entity indicated in therequest; (E) generating data which includes first data corresponding tothe generation of the tokens and second data corresponding to anownership of the tokens; and (F) transmitting, by the first entitycomputer, the data to the second entity computer.

The exemplary embodiments are directed to a method comprising: (A)receiving, by a computer of a first entity, a first request from acomputer of a second entity to transfer tokens from the second entity toa third entity, the tokens including data representing an ownershipposition of a commodity by the second entity, at least a portion of thecommodity being in a physical possession of the first entity; (B)receiving, by the first entity computer, a second request from acomputer of the third entity to transfer the tokens from the secondentity to the third entity; (C) when the first request matches thesecond request, verifying, by the first entity computer, the ownershipposition of the tokens by the second entity; and (D) upon the successfulverification of the ownership position of the tokens, updating, by thefirst entity computer, the ownership position of the tokens from thesecond entity to the third entity.

In an embodiment, the step (D) comprises the following substeps: (I)temporarily preventing, by the first entity computer, an update to theownership position of the tokens; and (II) transmitting, by the firstentity computer, instructions to transfer funds from the third entity tothe second entity.

In an embodiment, the method further comprises: (III) upon receivingfrom the second entity computer a confirmation indicating that the fundsfrom the third entity have been received, performing the followingsubsteps: (a) removing, by the first entity computer, the temporaryprevention of the ownership position update of the tokens; (b) updating,by the first entity computer, the ownership data of the tokens to thethird entity; and (c) transmitting, by the first entity computer, theupdated ownership data to predetermined recipients, the predeterminedrecipients including the second and third entities.

In an embodiment, the step (b) further comprises: (i) encrypting, by thefirst entity computer, the updated ownership data; and (ii)transmitting, by the first entity computer, the encrypted data to thepredetermined recipients.

In an embodiment, the predetermined recipients comprise at least onefurther entity uninvolved in the transfer of the tokens. In anembodiment, the successful verification of the ownership position of thetokens is performed using a consensus operation.

In an embodiment, the method further comprises: upon a failedverification of the ownership position of the tokens, removing, by thefirst entity computer, the first and second requests to an exceptionpool.

In an embodiment, the method further comprises: receiving, by the firstentity computer, satisfaction data from the second entity computer toconvert the failed verification to the successful verification within apredetermined window; and continuing, by the first entity computer, tostep (D).

The exemplary embodiments are directed to a device comprising: anon-transitory memory having a program stored thereon; and a processorexecuting the program, wherein the execution of the program causes theprocessor to perform operations comprising: (A) receiving, by a computerof a first entity, a first request from a computer of a second entity totransfer tokens from the second entity to a third entity, the tokensincluding data representing an ownership position of a commodity by thesecond entity, at least a portion of the commodity being in a physicalpossession of the first entity; (B) receiving, by the first entitycomputer, a second request from a computer of the third entity totransfer the tokens from the second entity to the third entity; (C) whenthe first request matches the second request, verifying, by the firstentity computer, the ownership position of the tokens by the secondentity; and (D) upon the successful verification of the ownershipposition of the tokens, updating, by the first entity computer, theownership position of the tokens from the second entity to the thirdentity.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 shows a system for performing a transaction according to theexemplary embodiments.

FIG. 2 shows a service server of the system of FIG. 1 according to theexemplary embodiments.

FIG. 3 shows a method of a first process for generating tokens accordingto the exemplary embodiments.

FIG. 4 shows a method of a second process for performing a transactionaccording to the exemplary embodiments.

DETAILED DESCRIPTION

The exemplary embodiments may be further understood with reference tothe following description and the related appended drawings, whereinlike elements are provided with the same reference numerals. Theexemplary embodiments are related to a device, a system, and a methodfor transferring commodities in a system where a digitizedrepresentation of commodities (hereinafter “tokens”) are utilizedinstead of actual commodities and/or cash obligations. Specifically, theexemplary embodiments relate to a service entity that provides a servicefor performing different types of transactions related to the tokensthat represent the commodity. An entity that owns a commodity mayperform a first type of transaction where the commodity is representedwith tokens that are generated. The entity may also perform a furthertype of transaction where the tokens are exchanged from the entity(e.g., a seller or a first party to the transaction) for a negotiatedvalue or agreed upon amount of funds (e.g., cash) from a further entity(e.g., a buyer or a second party to the transaction).

An entity (e.g., a financial institution or other type of institution)may own a commodity that is transferable for funds (e.g., a cashamount). For example, the commodity may be a metal (e.g., gold, silver,copper, platinum, palladium, etc.), a natural resource (e.g., oil,natural gas, diesel, ethanol, uranium, wheat, corn, sugar, soybean,coffee, coco, rice, oats, mils, lumber, etc.), a financial asset (e.g.,a security, a treasury bond, a stock, etc.). With the tokensrepresenting the commodity, the service of the service entity providesaccelerated and straight-through processed post-trade solutions. Also,with the token representing the commodity and an exchange of the tokenentailing conveying an interest in the underlying commodity (e.g., anownership of the commodity), the token may track counterparty exposureat the gross and/or net obligation level.

Each token may include uniquely identifiable metadata. For example,there may be mutable metadata and immutable metadata. In a particularexample where the commodity is a security, the mutable metadata of acorresponding token may include the current owner, the beneficial owner,time information when the token was last traded, and an active smartcontract associated with the token. The immutable metadata may includethe security issuer, the International Securities Identification Number(ISIN), the par amount, the listing location, the settlement location,and the issue date. In another example relating to gold, the token mayrelate to one or more specific physical commodities that are stored in aremote location. The token may represent an ownership to a specific barof gold by including identification information (e.g., vault number,palette number, row number, column number, depth number, etc.). In thismanner, various types of data may be tracked using the token (and in thedistributed ledger).

The service provided by the service entity according to the exemplaryembodiments may utilize a distributed ledger system. The distributedledger system may also be decentralized and accessible only toparticipating entities that receive a distributed ledger. Thedistributed ledger used in the exemplary embodiments may utilize theprinciples of blockchain technology that creates a closed, trustedplatform where the participating entities may transact with greaterefficiency and transparency. The distributed ledger may be a databasemanaged by the service entity but processed via “distributed”processors, namely the processors of computing units associated with theparticipating entities. For each transaction and/or instance in which atoken is exchanged (i.e., an ownership has changed), the distributedledger may include a block that is included to represent the tokenexchange. More specifically, the block may be a discrete time-stamped“container” of transactions that have happened across a given timeframeto track how a token ownership has changed. When appended to thedistributed ledger, an aggregation block may be a block that is to beadded to the blockchain containing aggregated transactions of a specifictype for a specific settlement window. Therefore, the system may trackevery transaction utilizing every token (e.g., from each token beingcreated to each token being redeemed). As noted above, the distributedledger is managed by the service entity and a governance committee whichis made up of the participating entities. However, the distributedledger is distributed to the participating entities which provideprocessing operations related to utilizing the distributed ledger. Inthis manner, the system has a decentralized aspect.

The system utilized by the exemplary embodiments may also utilize thesecurity measures involved with the blockchain technology (e.g.,cryptography and consensus). The cryptography may provide anonymity andsecurity for participating entities that are parties involved in atransaction from the perspective of participating entities who arenon-parties to this particular transaction. With the distributed ledgerbeing provided to all participating entities, the cryptography may beused for each block and transaction added to a chain along with detailsassociated therewith, particularly new ownership or updated ownership oftokens. The consensus may provide a further security feature to ensurethat a transaction is a valid transaction. The valid transaction is onein which the parties of the transaction are performing valid actions.For example, an issue arising from electronic currency is doublespending in which the same currency may potentially be used for twoseparate transactions. This constitutes an invalid action. Accordingly,the exemplary embodiments may utilize a consensus operation in which agroup decision by the participating entities is used to validate orreject a transaction. Specifically, the group decision may utilize amajority model or a supermajority model to further increase the securityof validating the transaction.

In describing the mechanism by which the tokens are utilized herein, thecommodity may be gold. However, it should be noted that the use of thegold is only exemplary. Those skilled in the art will understand thatthe commodity may also be any other type including other metals, naturalresources, a security, etc. The exemplary embodiments may be modifiedfor use with any of these other types of commodities.

A token representing an obligation to pay cash may be a collateralbacked obligation token. A collateral backed obligation token hascollateral attached thereto. Therefore, the token of the system mayprovide an additional level of security for participants. Specifically,the collateral backed obligation token may be backed by segregatedcollateral within a depository account, cash collateral encumbered witha third party or via a letter of credit (LoC). The collateral values maybe reported to the Credit Control Interface (CCI). Participatingentities may be issued an equivalent amount of collateral backed tokensfor settlement purposes. In the case of a default, participatingentities holding these types of tokens may receive a preferred interestin the underlying collateral.

In resolving transactions being processed via the service entity, it maybe assumed that the service entity has performed all required actionsprior to executing the functionalities described herein and received anyrequired necessities that satisfy the restrictions associated with goldexchange (e.g., clearing the transactions with the appropriateauthorities). Accordingly, all transactions that are performed via theexemplary embodiments may be authorized (e.g., processing with the NSS).Furthermore, with the participating entities of the system eachreceiving the distributed ledger, the participating entities maymaintain intra-day credit facilities by counterpart within the CreditCommunications Interface (CCI) to allow for simplified compliancemonitoring and reporting.

Using the above operations, the exemplary embodiments provide amechanism in which tokens provide a basis for an exchange ofcommodities. Accordingly, the exemplary embodiments are described withregard to two processes. In a first process of the exemplaryembodiments, the tokens are created or generated for a participatingentity who owns the commodity. In a second process of the exemplaryembodiments, the tokens are exchanged for funds in a transaction betweenat least two participating entities.

FIG. 1 shows a system 100 for performing a transaction according to theexemplary embodiments. The system 100 may include a plurality ofcomponents associated with performing the commodity relatedtransactions. As illustrated, the system 100 may include participatingentities 105, 115, 150 utilizing computing devices 110, 120, 155,respectively. The system 100 may also include a communications network125, a clearing house 130, a vault 135, and a service entity 140providing a service via a service server 145. The system 100 illustratesconnections between the components such that the first and secondprocesses of the exemplary embodiments may be performed.

The participating entities 105, 115, 150 may represent any participatingentity of the distributed ledger system service provided by the serviceentity 140. The participating entities 105, 115, 150 may be any type offinancial institution. For example, the participating entities 105, 115,125, 135, 165 may be larger institutional firms with significant amountsof investments (e.g., banks, management companies overseeing mutualfunds, hedge funds, pension funds, etc., insurance companies, etc.).However, it should be noted that the participating entities 105, 115,150 being larger institutional firms is only exemplary. The exemplaryembodiments may also be utilized by any participating entity includingsmaller institutional firms, non-financial institutions, individuals,etc. Accordingly, the participating entities 105, 115, 150 may be anycommodity dealer.

To utilize the distributed ledger system service, the computing devices110, 120, 155 may establish a connection to the communications network145 via a wireless connection or with a wired connection. Accordingly,for example, the computing device 110 may establish a connection withthe computing device 120 and vice versa. The computing devices 110, 120,155 may establish a connection with the service server 145 to utilizethe features provided herewith in the exemplary embodiments. As will bedescribed in further detail below, the computing devices 110, 120, 155may be used by a participating entity in performing the first and secondprocesses of the exemplary embodiments. Accordingly, for the secondprocess, one of the parties may be a seller of a commodity and anotherone of the parties may be a buyer of the commodity. When not involved inthe transactions, the computing devices 110, 120, 155 are still utilizedby participating entities of the system but are nonparties to thetransaction. As will be described in examples below, the computingdevices 110, 120, may be used by the participating entities 105, 115,respectively, who are parties to transactions, while the computingdevice 155 may be used by the participating entity 150 who is anon-party to the transactions. In this manner, the participating entity150 may be a “bystander” to the transactions. However, as will bedescribed in further detail below, the participating entity 150 maystill be included in an operation that results from the transactionsbeing performed between the participating entities 105, 115.

The computing devices 110, 120, 155 may represent any electronic devicethat is configured to perform the functionalities described herein. Forexample, the computing devices 110, 120, 155 may be a portable devicesuch as a tablet, a smartphone, a laptop, etc. In another example, thecomputing devices 110, 120, 155 may be a client stationary device suchas a desktop terminal. The computing devices 110, 120, 155 may includethe necessary software, hardware, and/or firmware required to performthe operations according to the exemplary embodiments. For example, thecomputing devices 110, 120, 155 may each include a processor, a memoryarrangement, an input receiving device (e.g., a keyboard and a mouse), atransceiver (e.g., to establish the connection with the communicationsnetwork 125), etc.

With regard to the participating entities, it is noted that the system100 may include any number of participating entities. For example, theparticipating entities 105, 115 are participating entities of the systemand parties to the transaction. Therefore, the participating entity 150may be a participating entity only to the system (e.g., a non-party).However, the participating entity 150 may represent any number ofparticipating entities who are non-parties. As those skilled in the artwill understand, the system 100 utilizing the blockchain technology witha distributed ledger along with a consensus operation becomes effectivewith the inclusion of a plurality of participating entities. It ispreferable to have a large number of participating entities such that adecision rendered via the consensus operation may be trusted.

Accordingly, the participating entity 150 may represent a set ofparticipating entities or bystanders to the transaction between theparticipating entities 105, 115. Furthermore, it is noted that thetransaction including only one buyer and one seller is only exemplary.The exemplary embodiments may also perform transactions in which theremay be one or more buyers and/or one or more sellers such as withbilateral and multilateral transactions. Accordingly, the participatingentity 105 may represent a set of buyers (i.e., one or more buyers) andthe participating entity 115 may represent a set of sellers (i.e., oneor more sellers).

The communications network 145 may represent any single or plurality ofnetworks used by the computing devices 110, 120, 155 to communicate witheach other, the clearing house 130, the vault 135, and the serviceserver 145. For example, if the computing device 110 is an enterprisecomputer associated with the participating entity 105, thecommunications network 125 may include an enterprise network in whichthe computing device 110 may initially connect. The enterprise networkmay connect to a network of an Internet service provider to connect tothe Internet. Subsequently, through the Internet, a connection may beestablished with the other components of the system 100. It should benoted that the communications network 125 and all networks that may beincluded therein may be any type of network. For example, thecommunications network 125 may comprise a local area network (LAN), awide area network (WAN), a virtual LAN (VLAN), a WiFi network, aHotSpot, a cellular network (e.g., 3G, 4G, Long Term Evolution (LTE),etc.), a cloud network, a wired form of these networks, a wireless formof these networks, a combined wired/wireless form of these networks,etc. The communications network 125 may also represent one or morenetworks that are configured to connect to one another to enable thedata to be exchanged among the components of the system 100.

The clearing house 130 may be another type of financial institution thatprovides clearing and settlement services. That is, the clearing house130 may be any clearing member. For example, the clearing house 130 mayrepresent a clearing entity that is used when gold is exchanged intransactions. In another example, the clearing house 130 may represent aclearing entity that is used when treasury bonds, commoditiesderivatives, securities transactions, etc. are exchanged intransactions. Thus, the clearing service provided by the clearing house130 may entail a clearing of payments to transform a promise of paymentinto an actual physical transfer of funds from one bank to another.Those skilled in the art will appreciate the necessity of clearing as atransaction may be performed in a timeframe less than that needed forcompleting the underlying transaction. Thus, the clearing serviceprovided by the clearing house 130 may include the management ofpre-settlement credit exposures to ensure that a transaction is settledaccording to market rules (e.g., even if a party should become insolventprior to settlement). The clearing service performed by the clearinghouse 130 may include operations such as reporting/monitoring, riskmargining, netting of trades to single positions, tax handling, andfailure handling.

In performing its functionality, the clearing house 130 may be anintermediary entity standing between the participating entities 105,115. When the participating entities 105, 115 are involved in atransaction, the participating entities 105, 115 may be referred to asclearing firms. In creating the transaction and the commitments to oneanother, the participating entity 105 may offer to purchase a commodityowned by the participating entity 115 (or the participating entity 115may offer to sell the commodity to the participating entity 105). It maybe assumed that the transaction is negotiated or agreed upon by theparticipating entities 105, 115 prior to the features of the exemplaryembodiments being utilized. For example, the participating entities 105,115 may communicate manually with one another in creating thetransaction. In another example, the service entity 140 may provide afurther service in which the service server 145 may enable theparticipating entities 105, 115 to communicate with one another tocreate the transaction (e.g., a direct line of communication may beestablished via the service server, a general advertisement may beplaced for a purchase or sell opportunity for another participant torespond, etc.).

While providing the above described services, the clearing house 130 hasan objective of reducing a risk of the participating entities 105, 115involved in a transaction failing to honor the obligations of thetransaction. The clearing house 130 may reduce the settlement risksthrough netting operations in which transactions are offset betweenmultiple counterparties, providing independent valuation of trades andcollateral, requiring collateral deposits, monitoring creditqualifications of the participating entities 105, 115, and in manycases, providing a guarantee fund that used to cover any lossesexceeding a defaulting clearing firm's collateral on the deposit, etc.When a transaction and its terms have been agreed upon between theparticipating entities 105, 115, the transaction may be handed over tothe clearing house 130. The clearing house 130 constructively stepsbetween the participating entities 105, 115 and assumes a legalcounterparty risk for the transaction. That is, the clearing house 130performs a novation in which the trade title is transferred to theclearing house 130.

In view of the above manner in which the clearing house 130 operateswhere the clearing house 130 assumes and focuses the risk of settlementfailures, the clearing house 130 may also isolate the effects of afailure of the participating entities 105, 115 (if any). The absorptionof the risk through novation also introduces a need for the clearinghouse 130 to be properly managed and well-capitalized to ensure survivalin the event of a significant adverse event (e.g., a large clearing firmdefaulting, a market crash, etc.). As will be described in furtherdetail below, the clearing house 130 being well-capitalized may berelevant during a fractionalization operation.

It should be noted that the use of a single clearing house 130 is onlyexemplary. The clearing house 130 may represent a set of one or moreclearing institutions who cooperate in the clearing operation describedabove. Thus, the clearing house 130 may include a plurality of clearinghouses that perform at least one portion of the clearing operation forthe transaction to be completed. For example, the participating entity105 may be associated with a first clearing house, while theparticipating entity 115 may be associated with a second, differentclearing house. In another example, a further clearing houseunassociated with either participating entities 105, 115 may berequested to become involved in the clearing operation.

The vault 135 may represent a storage location for a commodity. Forexample, the vault 135 may be managed by a custodian. The custodian maybe a specialized type of bank tasked with safeguarding financial assetsof the participating entities 105, 115. For example, the custodian maystore assets or securities owned by the participating entities (e.g.,stocks, bonds, commodities, currency, etc.). In further example, thecustodian may perform other financial tasks such as settlementarrangement, information collection and tax related administration,administration of corporate actions, information gathering on thesecurities, foreign exchange transactions, etc. However, in contrast tothe clearing house 130, there is no novation involved with the vault 135and performs a role substantially similar to an escrow account/agent forthe transaction. Accordingly, the vault 135 may represent any entity orphysical location/component in which the commodity is physically movedto change ownership. For example, the clearing house 130 may house itscommodities in the vault 135. In another example and as will bedescribed in further detail below, the service entity 140 may also houseits commodities in the vault 135.

It is noted that the service entity 140 may personally have commoditiesstored in the vault 135 or may cooperate with a depository partner inusing the vault 135. Accordingly, the exemplary embodiments aredescribed herein where the usage of the vault 135 by the service entity140 may be a personal use, a partnered use, a shared used, etc. It isalso noted that the use of a single vault 135 is only exemplary. Forexample, the clearing house 130 may interact with a plurality ofdifferent vaults. Thus, in a substantially similar manner as the vault135, the service entity 140 may also hold a position in these vaults.Specifically, the service entity 140 may have a personal use, apartnered use, a shared use, etc. That is, the service entity 140 mayhave a presence where a commodity is being held by a clearing house 130on behalf of ownership by the participating entities 105, 115, 150 whoare participants to the distributed ledger system.

The service server 145 may be a component of the service entity 140 thatprovides the services according to the exemplary embodiments. Theservice entity 140 may represent any chartered trust organization orcompany. FIG. 2 shows the service server 145 of the system 100 of FIG. 1according to the exemplary embodiments. The exemplary service server 145includes a processor 205, a memory 210, and an input/output (I/O) device215. As would be understood by those skilled in the art, the processor205 performs conventional functionalities such as, for example, dataprocessing functionalities via a transaction application 220 and aledger application 225. The memory 210 performs data storagefunctionalities (e.g., storing data associated with the processesperformed by the processor 205) and the I/O device 215 represents anyinput/output component that performs functionalities associatedtherewith (e.g., a transceiver). For example, the I/O device 215 may beused for data exchange functionalities. The I/O device 215 isillustrated in the system 100 of FIG. 1 as capable of wiredcommunications but may also be configured to be capable of wirelesscommunications.

With regard to the processing functionalities of the service server 145indicated above, the processor 205 may be configured to execute thetransaction application 220. The transaction application 220 may be usedfor operations associated with the first and second processes of theexemplary embodiments. The transaction application 220 may provide afirst service in which a transaction between an owner of a commodity(e.g., the participating entity 115) and the service entity 140 isperformed. Specifically, the first service may relate to theparticipating entity 115 exchanging the commodity for tokens from theservice entity 140. The transaction application 220 may provide a secondservice for a transaction between a buyer of a commodity (e.g., theparticipating entity 105) and a seller of the commodity (e.g., theparticipating entity 115). Specifically, the second service may relateto the buyer remitting funds in exchange for the tokens of the seller,the tokens representing ownership of the commodity.

The processor 205 may also be configured to execute the ledgerapplication 225. The ledger application 225 may operate in conjunctionwith the transaction application 220.

Specifically, the ledger application 225 may generate a block to beadded to a chain of blocks as used in the distributed ledger system ofthe service entity 140. As the block contains an indication of new orupdated ownership of tokens, the ledger application 225 may be utilizedfor the first and second services of the transaction application 220.For example, when new tokens are generated for an owner of the commodity(e.g., the participating entity 115), the ledger application 225 maygenerate a block which includes information of the new tokens and theirownership to the owner. In another example, when tokens are exchangedfor funds, the ledger application 225 may generate a block includinginformation that a token has changed ownership (e.g., from theparticipating entity 115 to the participating entity 105 after a goldtransaction has completed). With the ledger application 225 generatingthe blocks, the ledger application 225 may provide further features suchas an encryption functionality (to encrypt the blocks to participatingentities who are not involved in the transaction non-parties) and averification functionality (to determine whether a consensus hasverified the transaction as valid so that the block may be generated).

According to the exemplary embodiments, the first service provided bythe service entity 140 via the service server 145 may relate to atokenization operation in which tokens are generated. Thus, the tokensmay be traded by the owner of the commodity that is being held by theservice entity 140. It is noted that the service entity 140 may receivephysical possession of the commodity, but the service entity 140 doesnot own the commodity per se. That is, the commodity that is being heldby the service entity 140 is still under the possession of the owner.Thus, tokens are not necessarily exchanged for the commodity but insteadare issued in view of physical possession of the commodity by theservice entity 140. The owner of the token still owns the commodityuntil the token is redeemed for re-possession of the commodity. Thetokenization operation may relate to operations performed by a varietyof the components of the system 100. Specifically, the tokenizationoperation may include operations performed by the owner of thecommodity, the clearing house 130, the vault 135, and the service entity140. A further operation that is performed by the service entity 140 mayaffect the remaining participants of the distributed ledger system viaan updating of the distributed ledger. The tokenization operation willbe described from various perspectives of the components in the system100.

Initially, the participating entity 115 may own a commodity. Theownership of the commodity may be with respect to a variety of differentownership types. In a first example, the participating entity 115 mayhave physical possession of the commodity (e.g., in the vault 135). Thatis, the participating entity 115 may have identification informationspecifying which bars of gold held in the vault 135 belong to theparticipating entity 115. In a second example, the participating entity115 may have an ownership position of the commodity. Specifically, theparticipating entity 115 may own the commodity but has no specificity asto an actual physical commodity. That is, the participating entity 115may have an amount of the commodity that may be guaranteed to beavailable for use by the participating entity 115. It is noted that theavailability of the commodity may be guaranteed by a variety ofdifferent types of entities (e.g., custodian bank). In this manner, theparticipating entity 115 may have an unallocated position of thecommodity as the ownership does not correspond directly to an actualphysical possession by the participating entity 115. For illustrativepurposes, the description herein relates to when the participatingentity 115 has an unallocated position of ownership of the commoditywhereas the clearing house 130 has a physical possession of thecommodity. It is noted that the unallocated position of the commodity ofthe participating entity 115 does not necessarily correlate to thecommodity in the physical possession of the clearing house 130.

An initial operation may be performed by the participating entity 115.Specifically, the participating entity 115 may transmit a request to theservice entity 140 via the service server 145. As is used herein, it maybe assumed that any exchange of data between the participating entity115 and the service entity 140 is performed using the network, hardware,and software components of the system 100 as described above. Therequest from the participating entity 115 may be a request for tokens.As described above, the tokens may be a digital representation for anownership position. Thus, the tokens may not have a predetermined,finite amount of the commodity associated therewith. The request fromthe participating entity 115 may include a predetermined amount of theunallocated position for the commodity. For example, the participatingentity 115 may have an unallocated position for 100,000 oz of gold. Therequest may indicate that 1,100 oz of the gold are to be representedwith the tokens.

It is noted that the request may include other types of information. Forexample, the request may indicate the parties involved in the transferof the unallocated position of the commodity. According to the exemplaryembodiments, the unallocated position of the commodity owned by theparticipating entity 115 may be transferred to the service entity 140that issues the tokens. The request may also indicate other informationsuch as a backer of the unallocated position. Thus, the clearing house130 may perform appropriate operations for the unallocated position tobe properly transferred (e.g., due to the novation, a physical transferfrom the clearing house 130 to the service entity 140 may require areplacement from the backer).

The request may also be transmitted from the participating entity 115 tothe clearing house 130 for the proper execution of the gold transaction.As described above, the clearing house 130 may act as an intermediaryposition for the gold transaction. The clearing house 130 may verifywhether the request for the gold transaction is valid through receivingrequests for the gold transaction from all involved parties. In thepresent example, the clearing house 130 may wait until a respectiverequest is received from the participating entity 115 and the serviceentity 140 to verify the gold transaction. It is noted that the clearinghouse 130 may require further information and/or operations to verifythe gold transaction. However, for illustrative purposes, the clearinghouse 130 receiving the requests from the involved parties may representall operations and requirements necessary for verification purposes.

Once the clearing house 130 has verified the gold transaction betweenthe participating entity 115 and the service entity 140, the clearinghouse 130 may perform further operations associated with the transferinvolved in the gold transaction. As described above, the request fromthe participating entities 115 and the request from the service entity140 may each indicate the unallocated position of the commodity that isto be transferred from the participating entity 115 to the serviceentity 140. Through the novation, the clearing house 130 may instructthe vault 135 to perform a transfer of a physical quantity of thecommodity. As noted above, the clearing house 130 may bewell-capitalized. In the particular instance, the clearing house 130 mayhave sufficient gold bars for requested gold transactions to becompleted.

The clearing house 130 may instruct the vault 135 to physically transferenough gold bars to cover the unallocated position to be transferredfrom the participating entity 115 to the service entity 140. Asdescribed above, it is again noted that the participating entity 115still remains the owner of the commodity (although possession is underthe service entity 140). In the above example, the participating entity115 may request that 1,100 oz of an unallocated position of gold is tobe transferred. Depending on geographic location and/or geographicrequirements, the gold bar may have a respective size. For example, agood delivery gold bar in New York is standardized to 100 oz each, inAsia is standardized to 1 kg each, and in London is standardized to 400oz each. For illustrative purposes, the London standard may be assumedto be used. Thus, the request of 1,100 oz of gold may be covered bythree bars of gold that totals 1,200 oz of gold. That is, to move 1,100oz of gold, a total amount of gold bars that is rounded up to the nextnearest amount of gold bars is physically transferred. Those skilled inthe art will appreciate that delivery of gold bars is performed as unitsof gold bars having the weight as indicated above. Accordingly, threegold bars totaling 1,200 oz are to be physically transferred to cover1,100 oz of gold. The clearing house 130 may instruct that three bars beselected from the vault 135 and moved to the possession of the serviceentity 140 (e.g., a vault of the service entity 140, to a depositorypartner in the vault 135, etc.). Since the service entity 140 has apresence in the vault 135, the transfer may be performed within areasonable amount of time (e.g., within a day, within a settlementwindow, etc.).

It is noted that although the ownership of the participating entity 115is an unallocated position, since actual gold bars have been moved intothe possession of the service entity 140 from the clearing house 130,the possession by the service entity 140 may be for an allocatedcommodity, namely the three bars that were physically transferred. Inthis manner, identification information of the three bars may beassociated with an allocated position of the 1,200 oz of gold.

It is also noted that the clearing house 130 may perform theverification operation at various times. For example, the clearing house130 may verify the gold transaction upon receiving all requiredinformation (e.g., the requests from the involved parties). In anotherexample, the clearing house 130 may provide a window in which allrequired information may be submitted thereto from all involved parties(e.g., a settlement window, by the end of the day, etc.).

When the commodity has been physically transferred to the service entity140, the clearing house 130 may transmit a response for the request tothe parties involved in the gold transaction. Thus, the participatingentity 115 and the service entity 140 may receive an indication that theunallocated position of the participating entity 115 has beentransferred to the service entity 140. The indication to the serviceentity 140 may also include further information such as identificationinformation of the specific gold bars that are now in possession of theservice entity 140.

When the service entity 140 has received the response from the clearinghouse 130, the service entity 140 may perform operations associated withthe tokenization. Specifically, the service entity 140 may generate thetokens to be associated with the participating entity 115. It is againnoted that for illustrative purposes, the tokens generated by theservice entity 140 may be a representation of the commodity and notnecessarily a fixed ratio indicative of a finite amount of the commoditylinked to each token.

Initially, the service entity 140 may determine a total value asindicated in the response from the clearing house 130 resulting from thephysical transfer of the commodity from a physical possession of theclearing house 130 to a physical possession of the service entity 140.As described above, the clearing house 130 may have instructed thatthree gold bars totaling 1,200 oz be physically transferred to theservice entity 140. Using the total value of the physical transfer, theservice entity 140 may determine how the tokens are to be generated.Specifically, as the total value is at least the requested amountindicated from the participating entity 115, the total value maypotentially be over the requested amount.

In the current example, as the total value exceeds the requested amount,the service entity 140 may generate first tokens to be assigned to theparticipating entity 115. Specifically, the first tokens may represent avalue corresponding to the requested amount of the unallocated positionof the commodity (i.e., 1,100 oz). The service entity 140 may alsogenerate second tokens to be assigned to the owner of the remainder(i.e., 100 oz). In an exemplary embodiment, the owner of the remaindermay be the clearing house 130 as the gold bars under the possession ofthe clearing house 130 was physically transferred to the service entity140. However, it should be noted that the clearing house 130 beingassigned the second tokens is only exemplary and any entity thatultimately has ownership to the remainder may be assigned the secondtokens. In this manner, the service entity 140 may generate the firsttokens representing the requested amount that is assigned to theparticipating entity 115 and the second tokens representing theremainder amount that is assigned to the clearing house 130.

With the generation of these new tokens, the information correspondingto the generation and ownership of these tokens is propagated to theparticipating entities of the distributed ledger system. In a firstexample, the information may be transmitted to the participatingentities involved in the gold transaction. In this case, theparticipating entity 115 may be provided data corresponding to thisinformation as to its ownership of the newly generated tokens. In asecond example, the information may also be transmitted to theparticipating entities of the system 100. Specifically, the block may begenerated for addition to the blockchain of the distributed ledger.However, for security purposes, the data of this information that isembodied in the block may be encrypted. It is noted that any encryptionscheme may be used in generating the block. Once the block has beengenerated for the distributed ledger, the service entity 140 maytransmit the block to the participants to update the information of alltokens and ownership thereof that is used in the system 100.Specifically, the block may be transmitted to the participating entities105, 115, 150.

As described above, the three gold bars totaling 1,200 oz werephysically transferred from the clearing house 130 to the service entity140. Therefore, the first and second tokens that are generated forassignment to the participating entity 115 and the clearing house 130may be allocated to these three gold bars. For example, the first tokensmay include a first portion representing 800 oz of the 1,100 oz that isallocated to a first one and a second one of the three gold bars. Thefirst tokens may include a second portion representing the remaining 300oz of the 1,100 oz that is allocated to the third one of the three goldbars. The second tokens may represent the remainder amount of 100 ozfrom the total 1,200 oz that is allocated to the third one of the threegold bars. Thus, the information included in the block regarding thegeneration and ownership may also reference the specific bar to whichthe physical commodity is allocated being held by the service entity 140in the vault 135.

It is noted that the verification of the gold transaction involved inthe tokenization operation may also utilize the consensus operation.Specifically, the consensus operation may still take place as all theparticipants are ultimately made aware of the creation of the token.

According to the exemplary embodiments, the second service provided bythe service entity 140 via the service server 145 may relate to atransaction operation between the participating entities 105, 115 inwhich tokens are exchanged for funds. Thus, the tokens that representthe commodity may be used in lieu of a physical transfer of thecommodity from the participating entity 115 to the participating entity105. Accordingly, the ownership of the commodity is exchanged. In thismanner, the time frame for a gold transaction between the participatingentities 105, 115 may be completed in a more efficient way. For example,a gold transaction using a traditional exchange may require four days tocomplete from the transaction being negotiated or agreed upon by theparticipating entities 105, 115. However, the gold transaction using themechanism according to the exemplary embodiments may be completed withina day or within the same day from the transaction being negotiated oragreed upon by the participating entities 105, 115. The transactionoperation may relate to operations performed by a variety of thecomponents of the system 100. Specifically, the transaction operationmay include operations performed by the buyer of the commodity (e.g.,the participating entity 105), the seller of the commodity (e.g., theparticipating entity 115), the clearing house 130, the vault 135, andthe service entity 140. A further operation that is performed by theservice entity 140 may affect the remaining participants of thedistributed ledger system via an updating of the distributed ledger(e.g., the participating entity 150). The transaction operation will bedescribed from various perspectives of the components in the system 100.

The transaction described herein may assume that the participatingentity 115 that is selling the commodity has already tokenized thecommodity (e.g., using the first process described above). Thus, thetransaction relates to an exchange of funds for tokens. However, itshould be noted that the second service may incorporate the firstservice. Specifically, the first service may be inserted into theoperations of the second service for the tokens to become available fora commodity that is purchased. For example, the participating entity 115may not have enough tokens available but wishes to perform thetransaction using tokens. Thus, aspects of the second service may havealready been performed to trigger the first service to be used thereinfor the remainder of the second service to be completed.

The participating entities 105, 115 may enter into a negotiatedagreement to exchange a commodity for funds. Specifically, the agreementis an exchange for tokens representing the commodity for funds. Asdescribed above, the agreement may be entered into by the participatingentities 105, 115 using a variety of different methods (e.g., personallycontacting one another for a purchase offer or sell offer, anadvertisement, etc.). After the participating entities 105, 115 havenegotiated the terms (e.g., an amount of funds and an amount of thecommodity, a rate of exchange, etc.), the agreement may be executed toperform the transaction.

Initially, when used for the transaction operation, the transactionapplication 225 of the service server 145 may operate with a modifiedinfrastructure from conventional infrastructures by leveraging thedistributed ledger system. From a network architecture perspective, theservice server 145 may operate with two layers: a messaging layer and aconsensus layer. As will be described in further detail below, themessaging layer may be directed to clearing and matching transactions,verifying funds, messaging, and netting whereas the consensus layer maybe directed to performing a consensus operation and adding blocks toblockchains to update the distributed ledger.

When the agreement has been entered by the participating entities 105,115, the participating entities 105, 115 may communicate the requestassociated with the agreement over the messaging layer for matching tobe dropped into the consensus layer for validation and permanentlyentered into the distributed ledger. Thus, the requests from each of theparticipating entities 105, 115 may be received by the service server145 which is used herein as a representation of the service (and themessaging layer). Through the consensus operation, verified transactionsmay be further processed. It is noted that the consensus operation maybe performed at a variety of different times. For example, the consensusoperation may be performed by being triggered from a transaction beingattempted to be completed. In another example, the consensus operationmay be performed at predetermined intervals (e.g., every 30 seconds).

Thus, a request from the participating entity 105 may include details ofthe transaction including an identity of the participating entity 115that has the tokens and the terms of the agreement. A request from theparticipating entity 110 may also include corresponding details of thetransaction including an identity of the participating entity 105 thathas the funds and the terms of the agreement. When the requests havebeen matched and verified, further processing is performed. It is againnoted that there may be additional parties to the transaction. Thus, thematching and/or netting process that is performed may require actionsperformed by each of the involved parties.

Once matched, the service entity 140 may determine an ownership positionof the participating entity 115 of the tokens assigned thereto.Specifically, the consensus operation may verify whether the tokenspurported to be available for the agreement are in fact available. It isagain noted that the consensus operation may ensure that a doublespending issue does not arise.

When the tokens of the participating entity 115 have been verified, theservice entity 140 may perform the further operations. Initially, thedistributed ledger may be constructively or actually prevented frombeing updated. This prevention operation may be associated with theconsensus operation. Thus, with the distributed ledger being preventedfrom being changed, the block associated with the current transactionmay be generated. To complete the transaction, the participating entity105 may be instructed to perform its terms by remitting the agreed uponfunds. Those skilled in the art will understand the various andefficient manners in which funds may be remitted from the participatingentity 105 to the participating entity 115. When the funds have beenverified as being remitted (e.g., a confirmation is received from thereceiving party, from the sending party, from both parties, etc.), theservice entity 140 may enable updating of the distributed ledger and addthe block corresponding to the transaction to the distributed ledgerwhich is propagated to the participants of the distributed ledgersystem. The service entity 140 may also send data corresponding to thecompleted transaction to the involved parties.

It is again noted that the information of the block may be encrypted forsecurity purposes. For example, the identities of the parties involvedin the transaction may be prevented from being disclosed throughencryption. In another example, the details of the transaction (e.g.,funds transferred, representative commodity amount transferred, etc.)may also be prevented from being disclosed through the encryption.

FIG. 3 shows a method 300 of the first process for generating tokensarrangement according to the exemplary embodiments. Specifically, themethod 300 relates to the tokenization operation in which a commodity isrepresented by tokens as used in the service provided by the serviceentity 140. That is, a physical possession of the commodity may be movedunder the control of the service entity 140 but the ownership remainswith the participating entity who is the owner. The method 300 will bedescribed from the perspective of the service entity 140. The method 300will also be described with regard to the system 100 of FIG. 1 and theservice server 145 of FIG. 2. It is again noted that communications inwhich data is exchanged is performed through the appropriate network,hardware, and/or software of the respective entities.

In step 305, the service entity 140 receives a request from theparticipating entity 115 for tokens. It may be assumed that acorresponding request was transmitted from the participating entity 115to the clearing house 130. The request may include various types ofinformation. Specifically, the request may include an identity of theparticipating entity 115, an identity of the service entity 140, and apredetermined amount of the commodity that is to be transferred inownership. As noted above, the ownership by the participating entity 115may be an unallocated position of the commodity that is housed byanother entity (e.g., a custodian bank).

In step 310, the service entity 140 may transmit a request to theclearing house 130. As described above, in performing its functionality,the clearing house 130 may first determine whether a transaction isvalid. Thus, one requirement may be that requests from the involvedparties are received from the respective parties with details of thetransaction. Accordingly, the service entity 140 may generate therequest based upon the information included in the request received fromthe participating entity 115.

In step 315, the service entity 140 may receive a response from theclearing house 130. The response may be in relation to the request thatwas transmitted to the clearing house 130 from the service entity 140.As the request transmitted to the clearing house 130 from the serviceentity 140 includes details of the participating entity 115 and theservice entity 140 along with a commodity amount to be transferred, theclearing house 130 may attempt to perform operations that satisfy averified request.

In step 320, the service entity 140 determines whether the responseindicates that the requested transfer of the commodity has beenperformed. That is, the service entity 140 determines whether theresponse indicates that the unallocated position of the participatingentity 115 has resulted in a physical transfer of the commodity from theclearing house 130 to the service entity 140 within the vault 135(resulting in an allocated commodity owned by the service entity 140).However, there may be instances where the clearing house 130 determinesthat the participating entity 115 does not have enough ownership of thecommodity indicated in the request. When such a scenario arises, theresponse may indicate that the commodity was not transferred. Thus, instep 325, the service entity 140 may determine whether there is timeremaining for the transaction to still be completed. For example, theparticipating entity 115 may have performed other transactions that leadto the participating entity 115 having a sufficient amount of thecommodity but that these transactions have not yet completed. Thus, theservice entity 140 may provide a window in which the physical transferof the commodity to the service entity 140 may be performed. If there isstill time left in the window, the service entity 140 may return themethod 300 to step 310. However, if there is no time remaining, theservice entity 140 may reject the request.

The window in which to determine whether the physical transfer has beenperformed may be based upon a variety of factors. In a first example,the window may be a value associated with the service entity 140.Specifically, the value may be a predetermined amount of time in whichthe request for tokenization may remain pending until an ultimaterejection must be issued. In a second example, the window may be a valueassociated with the clearing house 130. Specifically, the value may be asettlement window or other timer that the clearing house 130 uses inwhich the gold transaction may be completed. By aligning the window withthe value of the clearing house 130, the service entity 140 may rejectrequests that have also been rejected by the clearing house 130.

It should be noted that the window and the rejection of the request maynot incorporate the responsibilities of the clearing house 130 which hasassumed these responsibilities through the novation. That is, there mayalso be scenarios such as insolvency of the participating entity 115that may have occurred after the request was transmitted to the clearinghouse 130. However, the clearing house 130 may perform appropriateoperations associated with handling these types of scenarios thatprotect the service entity 140.

Returning to step 320, if the service entity 140 has determined that thecommodity has been physically transferred from the clearing house 130 tothe service entity 140 in the vault 135, the service entity 140continues the method 30 Oto step 335. As discussed above, the clearinghouse 130 may perform a variety of different operations upon verifyingthe request for the gold transfer. The indication from the clearinghouse 130 that these operations were completed allows the service entity140 to perform subsequent operations.

In step 335, the service entity 140 determines a total value of thephysical transfer of the commodity. As described above, the physicaltransfer of the commodity from the clearing house 130 to the serviceentity 140 in the vault 135 entails units of the commodity to bephysically transferred. However, the units that are physicallytransferred must cover the requested amount indicated in the requestreceived from the participating entity 115. For example, the requestedamount may be 1,600 oz of gold in which a gold bar is standardized as400 oz each. Thus, four gold bars perfectly satisfy the 1,600 oz requestas four gold bars has a total value of 1,600 oz. However, in anotherexample, the requested amount may be 1,000 oz of gold in which a goldbar is standardized as 400 oz each. Thus, three gold bars satisfy the1,000 oz request as three gold bars has a total value of 1,200 oz.

In step 340, the service entity 140 determines whether there is aremainder amount from the total amount after the requested amount hasbeen processed. If there is no remainder amount, the service entity 140continues the method 300 to step 345 to generate the tokens to beassigned to the participating entity 115. However, if there is aremainder amount, the service entity 140 continues the method 300 tostep 350 to generate first tokens to be assigned to the participatingentity 115 (that correspond to the requested amount) and second tokensto be assigned to the clearing house 130 (that correspond to theremainder amount). It is again noted that the clearing house 130 beingassigned the second tokens is only exemplary and any owner of theremainder amount may be assigned the second tokens.

In step 355, the service entity 140 generates data corresponding to thegeneration of the tokens and the ownership assignment of the tokens. Forexample, with no remainder amount, the data may include that the tokenswere generated for the participating entity 115 only having arepresentative value corresponding to the requested amount. In anotherexample, with a remainder amount, the data may include that the firsttokens were generated for the participating entity 115 having arepresentative value corresponding to the requested amount and secondtokens were generated for the clearing house 130 having a representativevalue corresponding to the remainder amount.

In step 360, the service entity 140 transmits the data to the partiesinvolved in the gold transaction. Thus, the participating entity 115 andpotentially the clearing house 130 may receive the data regarding theirownership of the tokens. In step 365, the service entity 140 generatesand encrypts a block corresponding to the gold transaction to be addedto the distributed ledger. Thus, in step 370, the service entity 140transmits the block to the participating entities of the distributedledger system.

FIG. 4 shows a method 400 of the second process for performing atransaction according to the exemplary embodiments. Specifically, themethod 400 relates to the transaction operation in which funds areexchanged for tokens (i.e., ownership of the commodity) as used in theservice provided by the service entity 140. The method 400 will bedescribed from the perspective of the service entity 140. The method 400will also be described with regard to the system 100 of FIG. 1 and theservice server 145 of FIG. 2. It is again noted that communications inwhich data is exchanged is performed through the appropriate network,hardware, and/or software of the respective entities.

In step 405, the service entity 140 receives a first request from theparticipating entity 115 (representing the seller). In step 410, theservice entity 140 receives a second request from the participatingentity 105 (representing the buyer). The first request from theparticipating entity 115 and the second request from the participatingentity 105 may indicate that the transaction is between these partiesfor a previously negotiated or agreed upon funds to token transfer.Thus, it may be assumed for the method 400 that the participatingentities 105, 115 have negotiated the terms of the transaction prior totransmitting the respective requests. It is noted that the timing inwhich the first and second requests are received by the service entity140 is irrelevant so long as the requests are received formatching/netting purposes.

However, it should also be noted that there may be a time windowassociated with receiving the requests before the overall request isrejected.

It should again be noted that the second service of the transactionoperation may incorporate the first service of the tokenizationoperation. For example, the participating entities 105, 115 may haveagreed to use the tokens. Thus, the first and second requests may betransmitted to the service entity 140. However, the first and secondrequests may indicate an exchange of funds for an unallocated positionof the commodity. In this manner, the first service described in themethod 300 above may be incorporated to exchange the commodity to thetokens for use in the remainder of the method 400.

In step 415, the service entity 140 determines whether the first requestmatches the second request. As described above, the matching operationmay validate whether all involved parties are genuinely involved in thetransaction. The validation of the transaction through the matchingoperation may allow the transaction to proceed. However, if notvalidated, the service entity 140 continues the method 400 to step 420.In step 420, the service entity 140 rejects the requests.

If the first request matches the second request, the service entity 140continues the method 400 to step 425. In step 425, the service entity140 determines an ownership position of the tokens by the participatingentity 115. Specifically, the consensus operation as used in thedistributed ledger system with blockchain technology may be used in thisverification operation. Specifically, the consensus operation mayindicate whether the participating entity 115 has sufficient tokens toperform the requested transaction. Thus, in step 430, the service entity140 determines whether the transaction is indeed verified via theconsensus operation. If not verified, the service entity 140 continuesthe method 400 to step 420. However, if verified, the service entitycontinues the method 400 to step 435.

It should be noted that the ownership position of the participatingentity 115 for tokens may also have a corresponding operation for theparticipating entity 105. For example, the participating entity 105 maybe required to furnish proof that the funds that are agreed upon in thetransaction are available. Thus, the service entity 140 may also verifywhether the participating entity 105 is capable of performing its partin the transaction.

It should also be noted that step 420 may include further steps prior toa terminating action of rejecting the requests. For example, theobligated amount of the participating entity 115 may be determined toexceed an available sum of a balance or credit (e.g., of tokens). Theparticipating entity 115 may also fail to borrow (e.g., from the market)to cover the shortfall. Thus, according to the method 400, the serviceentity 140 may reject the request. However, prior to the rejection, theservice entity 140 may also utilize an exception pool. The exceptionpool may provide a buffer in which the transaction remains until theparticipating entity 115 remedies the situation. Transactions that arein the exception queue may automatically roll to an ensuing settlementwindow for a predetermined amount of time. For example, the rolling mayoccur until the end of a given day. If the participating entity 115 isunable to remedy the shortfall within the predetermined amount of time,the transaction may be rejected. While the transaction is in theexception pool, any funds promised to the participating entity 115 fromthe participating entity 105 may be held or prevented to protect thebuyer.

Returning to the method 400 where the transaction is verified, in step435, the service entity 140 completes the transaction. Specifically, theservice entity 140 prevents an update of the distributed ledger. Moreparticularly, the distributed ledger may be prevented from being updatedwith regard to the tokens involved in the current transaction. In step440, the service entity 140 instructs the participating entity 105 tofurnish the funds to the participating entity 115. In step 445, theservice entity 140 confirms that the funds were remitted. If notremitted, the service entity 140 may transmit the instruction again fora predetermined amount of time. If the funds fail to be furnished by theparticipating entity 105 within the predetermined amount of time, thetransaction may be rejected.

Once the funds are confirmed as being remitted from the participatingentity 105 to the participating entity 115, the service entity 140 maygenerate data corresponding to the completion of the transaction andtransmit the data to the involved parties. Thus, the participatingentity 105 may receive an indication that the tokens are now underownership thereby while the participating entity 115 may receive anindication that the tokens have been debited and the funds have beendeposited.

Additionally, in step 450, the service entity 140 enables updating ofthe distributed ledger such that in step 455, a block is generatedcorresponding to the transaction so that the distributed ledger may beupdated. In step 460, the service entity 140 transmits the block to allthe participating entities of the distributed ledger system.

It is again noted that the tokens represent an ownership of thecommodity that is under the physical possession of the service entity140. Accordingly, the service entity 140 may provide a further servicein which the physical possession is returned to the participating entitywho owns the token. Specifically, a redeeming operation may be providedin which the token is redeemed for the commodity. In this manner, theowner of the commodity may utilize the owned commodity as desired.

The exemplary embodiments provide a device, system, and method totransfer commodities using a tokenized asset. The exemplary embodimentsrelate to a mechanism in which a commodity is represented by tokens.Accordingly, the tokens may be exchanged for funds between participatingentities to expedite completion of a transaction in an efficient manner.In a first process of the exemplary embodiments, a tokenizationoperation may allow a participating entity to transfer an ownership orposition of a commodity in exchange for tokens. In a second process ofthe exemplary embodiments, a transaction operation may allowparticipating entities to exchange the ownership of the tokens forfunds.

Those skilled in the art will understand that the above-describedexemplary embodiments may be implemented in any suitable software orhardware configuration or combination thereof. An exemplary hardwareplatform for implementing the exemplary embodiments may include, forexample, an Intel x86 based platform with compatible operating system, aWindows platform, a Mac platform and MAC OS, a mobile device having anoperating system such as iOS, Android, etc. In a further example, theexemplary embodiments of the above described method may be embodied as aprogram containing lines of code stored on a non-transitory computerreadable storage medium that may be executed on a processor ormicroprocessor.

It will be apparent to those skilled in the art that variousmodifications may be made in the present disclosure, without departingfrom the spirit or the scope of the disclosure. Thus, it is intendedthat the present disclosure cover modifications and variations of thisdisclosure provided they come within the scope of the appended claimsand their equivalent.

1. A method, comprising: receiving a request for tokens, the requestindicating a predetermined amount of an unallocated position of acommodity of a selling entity; transmitting a further request for atransfer of the unallocated position of the selling entity to a buyingentity; receiving an indication of the transfer of the unallocatedposition from the selling entity to the buying entity; generating, usinga blockchain-based system in which a consensus operation operating on aplurality of distributed computer nodes updates a distributed ledger inwhich multiple copies of the distributed ledger exist across theplurality of distributed computer nodes, the tokens to be assigned tothe selling entity, the tokens corresponding to the predetermined amountof the unallocated position of the selling entity indicated in therequest and the tokens being added to a block in the blockchain-basesystem according to the consensus operation; and transmitting dataassociated with the generating of the tokens and an ownership of thetokens to the selling entity.
 2. The method of claim 1, wherein theunallocated position being managed by a third entity.
 3. The method ofclaim 2, wherein the generating of the data further comprises:encrypting the data to yield encrypted data; and transmitting theencrypted data to predetermined recipients.
 4. The method of claim 3,wherein the predetermined recipients comprise the selling entity and thethird entity.
 5. The method of claim 1, wherein the indication isfurther indicative of a physical transfer of the commodity from a thirdentity to the buying entity.
 6. The method of claim 5, wherein thephysical transfer of the commodity corresponds to a first value and thepredetermined amount of the unallocated position of the selling entitycorresponds to a second value, the first value being greater than thesecond value.
 7. The method of claim 6, further comprising: generatingfurther tokens to be assigned to the third entity, the further tokenscorresponding to a difference between the first value and the secondvalue; and generating further data which comprises third datacorresponding to the generating of the further tokens and fourth datacorresponding to a further ownership of the further tokens.
 8. Themethod of claim 7, wherein the generating of the data further comprises:encrypting the data and the further data to yield encrypted data andencrypted further data; and transmitting the encrypted data and theencrypted further data to predetermined recipients.
 9. The method ofclaim 1, wherein the buying entity is a chartered trust company, whereinthe selling entity is a commodity dealer, and wherein a third entity isa clearing member.
 10. The method of claim 1, wherein the furtherrequest instructs a third entity to allocate the commodity from thethird entity to the buying entity, the unallocated position of theselling entity corresponding at least partially to the allocatedcommodity.
 11. A device associated with a first entity, comprising: anon-transitory memory having a program stored thereon; and a processorexecuting the program, wherein an execution of the program causes theprocessor to perform operations comprising: receiving a request fortokens, the request indicating a predetermined amount of an unallocatedposition of a commodity of a selling entity; transmitting a furtherrequest for a transfer of the unallocated position of the selling entityto a buying entity; receiving an indication of the transfer of theunallocated position from the selling entity to the buying entity;generating, using a blockchain-based system in which a consensusoperation operating on a plurality of distributed computer nodes updatesa distributed ledger in which multiple copies of the distributed ledgerexist across the plurality of distributed computer nodes, the tokens tobe assigned to the selling entity, the tokens corresponding to thepredetermined amount of the unallocated position of the selling entityindicated in the request and the tokens being added to a block in theblockchain-base system according to the consensus operation; andtransmitting data associated with the generating of the tokens and anownership of the tokens to the selling entity.
 12. The device of claim11, wherein the unallocated position being managed by a third entity.13. The device of claim 12, wherein the generating of the data furthercomprises: encrypting the data to yield encrypted data; and transmittingthe encrypted data to predetermined recipients.
 14. The device of claim13, wherein the predetermined recipients comprise the selling entity andthe third entity.
 15. The device of claim 11, wherein the indication isfurther indicative of a physical transfer of the commodity from a thirdentity to the buying entity.
 16. The device of claim 15, wherein thephysical transfer of the commodity corresponds to a first value and thepredetermined amount of the unallocated position of the selling entitycorresponds to a second value, the first value being greater than thesecond value.
 17. The device of claim 16, wherein the processor performsfurther operations comprising: generating further tokens to be assignedto the third entity, the further tokens corresponding to a differencebetween the first value and the second value; and generating furtherdata which comprises third data corresponding to the generating of thefurther tokens and fourth data corresponding to a further ownership ofthe further tokens.
 18. The device of claim 16, wherein the generatingof the data further comprises: encrypting the data and the further datato yield encrypted data and encrypted further data; and transmitting theencrypted data and the encrypted further data to predeterminedrecipients.
 19. The device of claim 11, wherein the buying entity is achartered trust company, wherein the selling entity is a commoditydealer, and wherein a third entity is a clearing member.
 20. The deviceof claim 11, wherein the further request instructs a third entity toallocate the commodity from the third entity to the buying entity, theunallocated position of the selling entity corresponding at leastpartially to the allocated commodity.